Anabelle Colaco
15 Apr 2026

WASHINGTON, D.C.: Rising energy costs linked to the Iran war pushed U.S. wholesale prices sharply higher in March, adding to inflation concerns and complicating the Federal Reserve's policy outlook.

On Tuesday, the Labor Department said its producer price index (PPI), which tracks inflation before it reaches consumers, rose 0.5 percent from February and 4 percent from a year earlier, the largest annual increase in more than three years.

Energy prices surged 8.5 percent over the month, driving much of the increase.

Excluding volatile food and energy components, core producer prices rose a more modest 0.1 percent from February and 3.8 percent year-on-year. Overall gains were smaller than economists had expected.

The data adds pressure on Federal Reserve policymakers, who are already grappling with persistent inflation and calls from President Donald Trump to cut interest rates. Some officials, however, are considering rate hikes as rising energy costs threaten to keep inflation elevated.

Food prices offered some relief, falling 0.3 percent in March after a sharp 2.4 percent increase in February.

Wholesale prices are closely watched as an early indicator of consumer inflation. Economists also track them because some components, including healthcare and financial services, feed into the Fed's preferred inflation gauge, the personal consumption expenditures (PCE) price index.

"The decline in food prices is overdue, and welcome news for everyone," said Carl Weinberg, chief economist at High Frequency Economics. "Food price increases are at the core of political arguments over affordability."

Recent consumer data has already pointed to mounting inflation pressures. The Labor Department reported last week that consumer prices rose 3.3 percent in March from a year earlier, the biggest annual increase since May 2024, while monthly prices jumped 0.9 percent, the largest gain in nearly four years.

The broader energy shock is also reshaping global demand patterns. The International Energy Agency said the war in Iran could lead to an annual decline in oil demand for the first time since the COVID-19 pandemic.

The agency forecast demand would fall by 80,000 barrels per day this year, a sharp reversal from its earlier projection of an 850,000-barrel-per-day increase before the conflict began.

Demand dropped particularly sharply in March due to attacks on energy infrastructure and the closure of the Strait of Hormuz, with the IEA expecting a 1.5 million barrels per day decline in the current quarter.

While the initial drop has been concentrated in the Middle East and Asia-Pacific, the agency said that weakening demand is likely to spread as higher prices and supply constraints weigh on consumption.